If you are a large employer, union funds broker, fiduciary, or anyone responsible for a health plan that spends half of its dollars on hospital care (which most do), or if you have anything to do with policy or enforcement of policy, yeah … listen this week and next week.
For a full transcript of this episode, click here.
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My guest this week, Brennan Bilberry, helps you spot red flags in your own contracts and local market structure. Then my guest next week, Matthew Cantor, walks through how those same patterns became the backbone of major litigation and enforcement actions that might open up for others going forward.
So, today … yes, we are again digging into the business of hospitals in this country; and when I say hospitals, I mean the leadership of some so inclined hospital health systems, consolidated entities. Matthew Cantor (again, my guest next week) says there is a distinct difference between the corporate entity of the health system company and the actual doctors and nurses who are on the ground trying to get patients the care they need. And we talk about that distinction very, very often on this podcast—and I wanna underline it again here.
So, right, there has been some very subtle foreshadowing so far about my guest next week, who is the very same Matthew Cantor who was the lead litigator in the very, very big, very hard-fought and -won antitrust, class action lawsuit, resulting in hundreds of millions of dollars in settlement against the Sutter Health system over claims that it used its substantial market power to drive up inpatient prices and health insurance premiums. So, that’s what’s gonna happen next week.
But wait … there’s more reasons why this episode with Brennan Bilberry today is really relevant. This episode is also needed context for the antitrust lawsuits recently brought by the DOJ against Ohio Health and NewYork-Presbyterian.
The DOJ is alleging (surprise, surprise) anticompetitive practices such as using anti-steering clauses to prevent health plans from creating lower-cost options. What the DOJ is doing is building upon the legal precedents established by that Sutter case that I was just talking about, that Sutter Health litigation.
But yeah … today’s show is the anticompetitive backdrop behind all of this, what the playbook looks like, clause by clause. And look, if you want the full anticompetitive curriculum (available here at Relentless Health Value), do go back also and listen to two of the episodes with Cora Opsahl (EP373 and EP452), where she talks about the scuffle between 32BJ, the union, and NewYork-Presy.
Now, let’s start from the beginning, which apparently is difficult for me. You know why my guest today, Brennan Bilberry, got into his current line of work battling hospital chain anticompetitive practices? He got into it because this behavior, which is normalized in healthcare, would never be tolerated in any other sector of the economy. No one would get away with it because these anticompetitive practices are, hey, anticompetitive. They spell the death of functioning markets.
So, we kick off our conversation today, Brennan and I, going through the typical hospital system consolidation playbook and how anticompetitive practices are kind of part of the typical gig here at this point. It’s quite clever, by the way, if your main metric is revenue maximization. Anticompetitive contract terms are, after all, a flywheel. You consolidate to get enough market power to effectively force everyone to sign your anticompetitive contracts.
After that, step two of the anticompetitive playbook: You break out your anticompetitive contract term’s spatula, and you scrape out any remaining competition from your area.
You can use your leverage to buy or kneecap as many independent practices as you can. You can also use (and for more on this, follow Leah Houston, MD, on LinkedIn), you can use noncompetes with physicians. Get it so that health system charges amount to 50% or more of most plan sponsors’ spend. And here we are. Don’t you love it when a plan comes together?
Today with Brennan Bilberry, we talk about four contract terms that any self-respecting anticompetitive hospital contract should include and how each of them restricts competition unfairly and causes higher prices to communities, taxpayers, patients, employers … which, of course, creates unaffordability for basically everybody, including people who work at the health system, who wind up needing medical care.
Here’s the four anticompetitive contract terms that we dig into in this episode:
All-or-nothing contracting, wherein a hospital system says if you want us in your network, you must include every single facility that we have in your network and at the monopoly-level prices we demand, even in areas that might be competitive. There is a reason why a hospital system might be all hachi machi to buy a rando not super profitable hospital in a rural area. The payer must include that hospital in their network then because of network adequacy or whatever. And then from then on, all of their care settings are now in network—even the lower-quality ones—and all of them at the highest prices. And there’s no price negotiation that’s possible after that.
Anti-steering and anti-tiering clauses: This means that a payer/ASO (administrative services organization)/TPA (third-party administrator)/plan sponsor cannot steer members to lower-cost or higher-quality hospitals, nor can it offer benefit designs that have tiers (ie, lower co-pays if a member goes to specified high-value hospitals). So, any chance of using consumerism or navigation as a way to get members to better places is just eviscerated by this little move.
Pricing gag clauses: It’s when contract terms prohibit an ASO/TPA from telling its plan sponsor customers or members what the price of services are before (or sometimes even after) the service is rendered, claiming it’s important to not let employers or patients know these costs because revealing actual prices will [checks notes] cause hospital prices to go up. I’m speechlessly mystified by this logic, but okay … I only have a bachelor’s in economics.
Contract terms that restrict other providers in the market: So, a dominant hospital uses admitting privileges or referrals or other leverage to effectively control other providers in the market, including providers who are ostensibly independent. So, while the market may look dynamic, it is really not.
My guest today, as aforementioned, is Brennan Bilberry, who is a founding partner over at Fairmark Partners, which is a law firm litigating some of these antitrust lawsuits against some of these hospital chains.
And again, don’t forget to come back next week for the conversation with Matt Cantor.
This podcast is sponsored by Aventria Health Group, and we did have an assist today from Payerset, who provided financial support to help keep this podcast on the air. So, thank you so much to Payerset.
And with that, here’s my conversation with Brennan Bilberry.
Also mentioned in this episode are Matthew Cantor, JD; Cora Opsahl; 32BJ; Leah Houston, MD; Fairmark Partners; Aventria Health Group; Payerset; Zack Cooper, PhD; Tricia Schildhouse; Scott Conard, MD; Mike Thompson; Gloria Sachdev, PharmD; Chris Skisak, PhD; Employers’ Forum of Indiana; and Jerry DiMaso.
For a list of healthcare industry acronyms and terms that may be unfamiliar to you, click here.
You can learn more at fairmarklaw.com and by following Brennan on LinkedIn.
Brennan Bilberry is a founding partner of Fairmark Partners, LLP, a law firm focused on fair competition issues, especially in the healthcare industry. Fairmark has filed numerous antitrust cases against dominant hospital systems, seeking to tackle anticompetitive practices that lead to higher prices for businesses, consumers, and unions.
Prior to founding Fairmark, Brennan worked as a policy consultant and political operative whose work included overseeing environmental public policy campaigns in numerous countries, providing international political intelligence for US investors, advising political campaigns around the world, and designing consumer and legal advertising.
Brennan also worked on numerous US political campaigns, including serving as communications director for Terry McAuliffe’s 2013 successful campaign for Virginia governor, serving as deputy executive director of the 2012 pro-Obama Super PAC Priorities USA, and developing research and policy communications for the House Democrats.
Brennan is a native of Montana and South Dakota and has lived in Washington, DC, for more than 15 years.
00:00 Introduction to this episode.
03:55 EP373 and EP452 with Cora Opsahl.
06:55 The conversation with Brennan Bilberry.
06:59 What happens after a hospital consolidates?
08:05 What an anticompetitive system looks like when a hospital consolidates.
10:51 LinkedIn post by Tricia Schildhouse.
11:12 Some anticompetitive “tricks” that hospitals employ.
13:13 Example: the Sutter case in northern California.
15:36 What to do if you’re forced to engage in an all-or-nothing contract with a hospital system.
19:17 Example: the Atrium case in North Carolina.
22:12 Explaining price gag clauses.
23:48 How legacy gag clauses are designed to prevent scrutiny in litigation.
24:45 EP249 with Dale Folwell.
26:21 How hospital restrictions on other providers create an anticompetitive environment.
27:34 EP391 with Scott Conard, MD.
29:59 EP389 with Mike Thompson and EP390 with Gloria Sachdev, PharmD, and Chris Skisak, PhD.
Recent past interviews:
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Doug Aldeen, Dr Siva and Dr Monica Lypson, Betsy Seals, Patrick Nelli, Lee Lewis, Stacey Richter with 15 experts (EP507), Jerry DiMaso, Dr Ahilan Sivaganesan